I find it ironic that a country which defrauded its way into the Euro Zone is likely to be the first country to exit the Euro Zone. Despite a raft of hasty denials by just about everyone in Brussels, it now seems all but inevitable that Greece will bail on the Euro when they default on the €110 billion bailout they received just one year ago.
Of course, this all started on Friday when an article came out in Der Spiegel claiming that Greece was mulling an exit from the Euro due to near-daily violent protests and the apparent failure of austerity measures. An emergency meeting of European finance ministers was convened in Luxembourg in response to the report, which they all denied. Methinks they doth protest too much.
Here are the facts:
- Greece will default on the bailout loan – and soon.
- There is no provision in the Maastricht Treaty (the treaty which gave birth to the Euro) for ejecting errant members – once they're in, the Euro Zone is stuck with them.
- There is, however, a relatively new provision included in the Lisbon Treaty which allows Euro Zone members to leave the Euro Zone of their own accord – where they are then free to debase their new currency in predatory and self-serving ways relative to their former partners.
This has the potential to get very ugly for the Euro. I doubt many traders are too concerned about the loss of a heavily socialized tourist economy, or even the €110 billion. What sends shivers down the currency market's collective spine is that Greece could provide the blueprint for higher-profile departures from the Euro Zone.
Ireland is already quietly admitting that they'll never be able to re-pay the €250 billion bailout they received, and that's a far more significant Euro Zone economy to lose than Greece. How long before the stronger countries start looking for the door? They certainly don't want to be left holding the bag.
It's fair to call me a Euro skeptic. I have been since 1999 when I saw firsthand how weak the Portuguese economy was and the escudo was one of the first currencies to yield to the Euro. But these are dark, dark clouds on the horizon, and it's going to be interesting to see how the Euro survives.
What do you guys think the over/under is on Greece pulling out of the Euro Zone? And should there be a provision in the Maastricht Treaty for the expulsion of member countries?